(CNSNews.com) – “As is well known, U.S. fiscal policies are on an unsustainable path, and the development of a credible medium-term plan for controlling deficits should be a high priority,” Federal Reserve Chairman Ben Bernanke told the Senate Banking Committee on Tuesday.

Bernanke also told lawmakers that the fragile recovery “could be endangered” by the combination of tax hikes and automatic spending reductions – the so-called “fiscal cliff” -- that will take place next year, if Congress does nothing to stop it.

Bernanke’s comments to the Senate panel came one day after a leading Democrat, Sen. Patty Murray of Washington, said Democrats will allow tax hikes and spending cuts to happen – unless Republicans cave in and allow tax hikes on the wealthy. Democrats use the word “balance” to describe tax hikes on wealthy Americans.

“If we can’t get a good deal, a balanced deal that calls on the wealthy to pay their fair share, then I will absolutely continue this debate into 2013 rather than lock in a long-term deal this year that throws middle-class families under the bus,” Murray said in a speech at Washington think-tank on Monday.

But on Tuesday, Bernanke said tax hikes and spending cuts would spur another recession:

“The Congressional Budget Office has estimated that, if the full range of tax increases and spending cuts were allowed to take effect -- a scenario widely referred to as the fiscal cliff -- a shallow recession would occur early next year and about one and a quarter million fewer jobs would be created in 2013,” Bernanke said. He added that “public uncertainty” about how the situation will be resolved could have additional negative effects on the economy.

“The most effective way that the Congress could help to support the economy right now would be to work to address the nation's fiscal challenges in a way that takes into account both the need for long-run sustainability and the fragility of the recovery. Doing so earlier rather than later would help reduce uncertainty and boost household and business confidence.”

Senate Republican leader Mitch McConnell on Tuesday blasted Murray and her fellow Democrats for threatening to take the country over the “fiscal cliff” unless Republicans agree to raise taxes on wealthy people – a group that includes many small businesses.

“It was an astounding admission, so allow me to repeat it: Democrats in Congress are now saying that they would rather see taxes go up on every American at the end of the year than let about a million businesses keep what they earn now. This isn’t an economic agenda, it’s an ideological crusade,” McConnell said.

He said the “Murray proposal” to raise taxes on everyone – by allowing the Bush tax rates to expire -- would trigger another recession and put the global economy at risk:

“The Democrats’ theory is that a massive income tax increase on 140 million American taxpayers wouldn’t be so bad because the effects wouldn’t be felt right away.

“This bizarre conclusion can only be reached by politicians and budget analysts who have never worked a day in the private sector, who don’t understand what goes into cutting a paycheck for your employees, and who don’t have a concept of the planning that is necessary when you are operating a business on thin margins in a tough economy,” McConnell said.

“Let me boil it down. Faced with the slowest economic recovery in modern times, chronic joblessness, and the lowest percentage of able-bodied Americans actually participating in the workforce in decades, Democrats’ one-point plan to revive the economy is this: you earn, we take. That’s apparently the only thing they’ve got.”

But Murray, in her speech, said allowing the Bush tax rates to expire at the end of the year would put enormous pressure on Republicans:

“If middle class families start seeing more money coming out of their paychecks next year—are Republicans really going to stand up and fight for new tax cuts for the rich? Are they going to continue opposing the Democrats’ middle class tax cut once the slate has been wiped clean? I think they know this would be an untenable political position. And I hope this pushes them to come to the table with real revenue (tax hikes on the wealthy) now -- before being forced to the table if we don’t get a deal before the New Year.”

Murray said Democrats will “keep reminding the American people why middle class tax cuts aren’t being extended immediately, even though both sides say they want them to be.”